Exploring Biases in Sales Management Decisions

183:906269490 • September 26, 2023

A story about how bias affects sales team management.

Javier, the Regional Sales Director, covered the Tennessee territory for 12 years. Mind you, that was some eight years ago, as he was recently reminded. Wow! Has it really been 20 years since I started in the communications systems business? A lot has changed in 20 years!

Javier is now hiring for that same position he once held. Again. For some reason, he’s having difficulty keeping the position filled, and no one is quite sure why.

The thing is, Javier knows this position. He ran it, and he was good at it. The territory was always fruitful back when he was selling. He’d always exceeded quota, but when he thinks about it, his hires never seem to be able to match his expectations.

A decade ago (or two now!), communications systems were a bit different. Everything is far more virtual than wired. More hosted than hardware. The sales are different and more complex as they often include third parties to help with additional applications and implementation. Furthermore, the industry in Javier’s former territory has shifted. The growth centers are now in different cities, and in many of the cities in Javier’s old territory, there has been economic decline. While many of the same clients and contacts still exist, they aren’t spending on the same things they once did. Not a lot of innovation is happening in the area.

Still, Javier has done his research, and the data is there that businesses still need the communication solutions his company provides. Sure, their product may be a tad premium for the territory, but a good salesperson ought to be able to overcome that. Javier did, after all.

As Javier sits down with the Operations & Enablement team to discuss the latest turnover stats, he can’t help but feel attacked. The other members of the committee are suggesting that maybe his quota allocation is a bit out of reach for the territory. Javier is looking at all the data they’re giving him, but there must be something missing. There must be some information out there that proves he’s right and that it’s just a string of bad sellers that are causing this problem. “There must be more data to support my position,” he thinks.

I’m going to stop the story right there because the point of it isn’t to show a happy ending, but rather to demonstrate two types of bias that may be preventing Javier from performing optimally as a sales leader as he could.

Confirmation Bias

Javier doesn’t want to admit this, but his perspective and information are a little outdated. Communications have changed in the years since he was selling. Instead of accepting that fact, Javier is latching on to the piece of data that confirms his belief. He sees that businesses in the territory need communications systems. It’s that simple! Or is it?

Of course, this is only a small piece of the puzzle, but it’s the piece he’s clinging to. This is called confirmation bias.

In my book Starting Simple: Finding Fairness, I describe confirmation bias in the following way:

This occurs when we seek out information that supports our stance. Data has a story to tell, but it’s all too easy to allow our bias to shape the story. For example, say you’re leading the air purifier company that cleaned house during the pandemic. The bar graph of your sales over the past ten years shows a drastic spike sometime around 2020, with sustained growth over a couple of years. But now, it’s starting to dip.

You like those big numbers. You want to have even bigger numbers. You’re looking to scale the company to a new level based on those numbers. And that’s confirmation bias at work. You can point to information that justifies growing your sales division and setting a stretch goal. You can talk yourself into believing that the slight dip in revenue this past year is a fluke or a result of your sales team getting too relaxed.

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In this case, Javier doesn’t want to be wrong. He doesn’t want the failings to be his. So, he’s grasping for data that supports his preferred reality rather than allowing the data to tell the story alone.

Information Bias

Another thing Javier is doing to further support his position is seeking information that isn’t there. Forget the fact that his commercial support team is showing him data that proves he has a quota allocation problem, and he doesn’t want to see it. So, he is choosing to believe that there are answers outside of the situation that can help.

From Starting Simple: Finding Fairness:

More isn’t always better, but with information bias, the idea is that more information will help you make a better decision. Notice we didn’t say that more relevant information will help you make a better decision.

With this bias, you seek information even if that information isn’t relevant to the decision at hand. This might occur when you’re in a particularly indecisive place or if you have a clear decision at hand but just don’t like it. Your response may be to seek more data and more information for no other reason than the unconscious belief that the answer lies outside of where you are now. Be wary of living in this analysis paralysis world for too long.

When setting a target, there’s a time for planning and research, and there’s a time for action. If your team is telling you there’s nothing left to be learned, it’s time to make a decision whether you like that decision or not.

Javier needs to listen to his support team. Sometimes, we have to simply check our egos and follow the guidance of those around us.

Why Worry About Bias in Sales?

I can think of dozens of reasons why these lessons are crucial to anyone in sales leadership, but what I want to focus on is job satisfaction and retention.

Your sales compensation plan has the primary purpose of keeping your salespeople both satisfied and hungry at the same time. It’s the unique walk of attracting external talent, motivating current actions and behaviors, and ultimately retaining top performers. You want the sales team to hit realistic targets but feel excited to go for more. And you want them to stay for the long run.

Making sure your comp plan is fair takes a lot of work, but one of the most impactful things you can do is assess it for biases like the ones illustrated in Javier’s story. Javier’s example is related to both defining the total market value and assessing what is achievable. This is the overlap between both territorial assignment and target setting.

If you have a sales compensation conundrum of your own, I’m here to help. With over sixteen years in sales compensation, I’ve pretty much seen it all.

You can reach me here.

Be sure to grab your copy of the latest book!

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What to do About a Long Sales Cycle

By 183:906269490 • April 21, 2025

If you’ve spent any time on this blog at all, you’ll know my belief that there’s no one-size-fits-all approach to sales compensation. Creating a comp plan that is motivating and fulfilling for your sales team while at the same time achieving your organizational goals takes consideration of many factors, including the goals of the company, the place of the organization in its life cycle, the culture, the behaviors you want to incentivize, etc. However, one of the most important factors in how you design your sales compensation program is the length of your sales cycle. For organizations with very long sales cycles, comp design isn’t as easy as offering a percentage commission on final closing. It will require a bit more thoughtfulness. What is a “long” sales cycle? For the purpose of this article, I’m defining a long sales cycle as any average sales process that extends beyond one year. And I’m not including the lead generation or initial discovery stages into that average – as we all know, it can sometimes take years to make progress with an organization or contacts before engagement in the initial phases of the selling process. Products or solutions in engineering, development, and construction services, government sales, and health system business development are good examples of offerings that take a long time to come to fruition. However, the key thing to take away from identifying roles with long sales cycle length is the experience of the salesperson - the longer the wait time between beginning the sales process and deal closure, the more challenging it is to connect the actions with the reward. How to Provide Compensation During Long Sales Cycles The goal when you have a long sales cycle, is to compress long-term actions into short-term incentives. Obviously, this is complicated by the fact that your organization doesn’t receive a payout until after the close of the deal—and depending on the contract, it may still be very far off from then. Some contracts come with payment terms where the full monetary benefit of the transaction isn’t seen for years. So, how do you keep your salesperson engaged during the long process? What does a reward program look like when it is five years from the time the salesperson starts to engage with the customer and the company receives initial payments? Here are a couple of things to consider. • Pay Mix: The split between base pay compensation and variable pay compensation should be commensurate with the risk (and corresponding reward) that the individual takes on in the role – meaning that generally, existing client sales carries less risk than new business sales. The size and scope of the job (e.g., Field Sales vs. Inside Sales) also come into play with the final equation. Generally, the split on pay for new business sits at around 50/50 to 60/40 (base to variable). Existing Client sales generally start around 60/40 and may go to 75/25 depending on the specifics of the role. Base Salary: With a long sales cycle, there needs to be financial coverage while they’re doing the work of moving a sale forward. It also means making sure their compensation doesn’t rely solely on the close of a sale—because the win rate is rarely 100%. Enterprise salespeople have very high base pay. And for good reason. Ideally, we want the sales incentives to be the star attraction, but too much pay at risk can prompt desperation (and potentially other side effects) rather than motivation and engagement. Creating Milestones: During long sales cycles, there are usually milestone moments or phases in the deal progression that increase the likelihood of the transaction getting to contract. One way to design a short-term incentive program is to identify these important milestones and build financial rewards associated with deal progression. If that isn’t feasible, putting more emphasis on recognition and praise at each of these milestones is considerably beneficial to morale during the long slog towards the deal win. Pay Curve: Thresholds and Accelerators are important components of the way variable pay is delivered. Much of this is related to the accuracy of the target (quota) and performance management as well. With the greater risk of these long-term transactions, the upside potential should be commensurate with the postponement of short-term incentives. The most common accelerators are in the 2x to 3x (times) base rate of pay. Ultimately, the performance levels for long-term transactions need to be modeled for the best fit and affordability specific to your organization’s financial sustainability. In short, you have to think about rewarding the process more than the outcome in order to improve the retention and motivation of your sales team. To learn more about the many complexities and nuances of creating a sales comp plan that attracts, retains, and motivates talent, sign up for my biweekly newsletter .

Structuring Timing for Maximum Success

By 183:906269490 • March 17, 2025

Over the past few weeks, we’ve delved into six crucial aspects of best practices in sales compensation: culture, financial due diligence, job content, pay mix, objectives, and plan mechanics. Each of these elements plays a pivotal role in shaping an effective and motivating compensation plan. Today, we turn our attention to another key component—timing. Defining Performance Period and Payout Timing There are two key aspects of compensation timing that affect how effective your compensation plan is at helping your organization reach its goals. These are: Performance Period : The timeframe over which sales performance is measured in the compensation plan—monthly, quarterly, annually, or per deal. Payout timing: The timeframe when a salesperson receives incentive earnings associated with their level of performance. While these concepts are distinct, they work together to influence sales behavior, business cash flow, and overall organizational success. Aligning Performance Period and Payout Timing with Organizational Objectives A well-structured performance period and payout schedule will reinforce your organization’s goals. For example, if you’re focused on rapid sales cycles and high transaction volume, you’ll probably use a shorter performance period and frequent payout timing to keep things moving along. On the other hand, if you’re prioritizing long-term account growth, large enterprise deals, or strategic selling, you’ll probably want to utilize longer periods (quarterly or annually) to encourage sustained effort and deeper customer relationships. Motivating Sales Teams with the Right Timing Salespeople are naturally driven by immediate, tangible rewards. If the gap between effort and payout is too long, enthusiasm may decline as the connection between work and reward weakens. On the flip side, overly frequent payouts—such as daily or weekly—could lead to transactional thinking rather than strategic selling. This is especially true when there are more frequent pay periods with very small amounts of pay. So before setting your performance period and cadence for payout, it’s essential to ask yourself what kind of behavior you’re trying to reward in your salesperson, as well as the sales function required to execute on your specific market and strategy. For long sales cycles where frequent payout timing simply doesn’t make sense, you’ll need to balance that by making sure your salesperson is aligned with organizational goals and that the salesperson is able to achieve meaningful levels of performance (as well as payout amounts) within that performance period. Best Practices for Performance Period & Payout Timing Choosing the right combination of performance period and payout timing is a strategic decision that shapes sales behavior and business outcomes. When well-designed, this timing structure maintains motivation, supports financial sustainability, and aligns sales incentives with broader company goals. A few best practices prevail: Align the payout to as close to the performance event (deal closing or otherwise) as possible, conditional on company affordability/sustainability Ensure that the performance period selected is closely aligned with the average sales cycle length. Generally, if there is a very short sales cycle, then a short performance period with quick pay is expected. That does scale up to very long sales cycles and longer performance periods with lesser payout frequency. Most organizations are somewhere in between. Be sure to recognize that it is specific to the sales role and not the company as a whole.

Plan Mechanics: Making it All Work

By 183:906269490 • March 3, 2025

In a way, we’ve already talked a lot about several components of sales incentive plan mechanics. We’ve covered the importance of culture , fundamental financial model ing, establishing job content , determining pay mix , and setting objectives . The next step will bring it all together. Some Important Sales Compensation Vocabulary We’ve previously described, at length, the two primary types of sales comp models (bonus plans and commission rate plans) as well as how to determine which plan best supports different sales roles. But there are a few other terms that are important to know when developing the underlying plan mechanics. The following list comes straight from my book Starting Simple: Sales Compensation . If you want a full but easy-to-understand breakdown of sales compensation, that book is the place to start. Accelerator--An increase in the rate of pay that occurs at a certain level of performance. Generally, this starts after the achievement of 100% of the target performance objective. Deal Cap--The maximum amount of pay on any single transaction Leverage--The sales incentive that would be paid out for performance between the target and the point of excellence. It is represented as a multiple of the target incentive Pay Curve--The slope of the line of the rate of pay throughout all levels of performance. Think of performance as the x-axis and payout as the y-axis. The pay curve represents the relationship between the two. In a fixed-rate plan, this is a straight line, representing a fixed rate of pay for every unit of measured performance (activity completed, dollar of revenue acquired, or percentage point of margin sold, etc.) Plan Cap--Maximum amount of pay under the construct of the plan Point of Excellence--The point on the pay curve that represents the 90th percentile of salespersons’ performance levels (should be greater than 100% of performance achievement) Rate of Pay--The amount of pay per unit of measurement. This encompasses the relationship between performance and payout at any point along the pay curve. Target--A point on the pay curve that represents 100% payout and 100% performance or (100%, 100%) Target Incentive--The sales incentive amount paid for achieving 100% of sales performance objectives Threshold--The point at which pay for performance starts. The threshold point should sit somewhere between 0% and 100% performance levels. It can be zero, which essentially means there is no threshold. Zero--The first point on the pay curve, represented by (0%,0%) for zero level of payout and zero level of performance Best Practices for Plan Mechanics A well-structured sales compensation plan aligns with your business objectives while keeping your team motivated. You need to balance risk and reward, ensuring that pay mix, thresholds, and accelerators drive the right behaviors. To evaluate whether your plan is driving the right behaviors, map your sales team’s performance along the pay curve—identifying where top, mid-level, and low performers fall. If most reps cluster near the threshold, the plan may not be motivating enough, while a heavy concentration at the high end could indicate overly generous payouts. A well-balanced distribution should show a clear progression, with incentives effectively encouraging continuous improvement and rewarding top achievers appropriately. Caps are controversial, and while they can help control costs, they can also discourage high performers. Accelerators, on the other hand, can be a powerful tool to motivate salespeople to exceed expectations. The key is to strike a balance—rewarding overachievement without creating unsustainable payout structures. Finally, sales compensation plans should evolve with business needs. In a future post, I’ll be talking about the importance of a regular review cadence for maintaining performance and fairness. When done right, plan mechanics create a system that doesn’t just pay salespeople but actively inspires them to excel.

How to Set Appropriate Targets

By 183:906269490 • January 31, 2025

Setting objectives is a constant balance between meeting your organizational goals and being realistic about the capabilities of your sales team. You want to be aggressive enough to reach revenue and profitability expectations as well as keep everyone motivated, but you don’t want to be so aggressive that your team feels it is impossible to succeed and just gives up. In part 5 of my Best Practices in Sales Compensation Series, we’ll go over some of the top things to consider for keeping your sales team engaged and successful. (Read Part 1 , Part 2 , Part 3 , and Part 4 ) When setting objectives for your organization, consider what you absolutely need versus the ideal you want; take into account the resources you have to work with (as well as the market situation and sales productivity); and create a target range ranging from easy to impossible—and place your target somewhere in the middle of that range. Types of Objectives There are several different types of objectives you might set for your sales reps. They can be sales process activities like making calls or qualifying leads. They can be progression milestones like hand-off triggers between internal teams or customer signoffs. But for our purposes, we’re going to focus on financial objectives such as revenue and profit. Best Practices for Setting Objectives Objectives need to align with organizational goals and provide achievable but challenging targets for the sales team. To accomplish this, consider these practices: Make sure that the salesperson has the ability to influence if not fully control, their capability to meet and exceed the objectives. Set realistic expectations. Unrealistic targets will stagnate your growth potential and give you a poor reputation with employees (as well as the labor market). Provide a clear and visible path to achieving the objective. Try to limit the quantity and types of objectives. More is not better. It’s better for a sales rep to be able to focus on a singular goal than to have their attention split in too many directions. Lastly, make a plan for what to do if your salesperson exceeds the target as well as underachieve target objective levels. These are just a few of the very important considerations in setting your objectives. Take some time to explore my blog or check out my books for a more in-depth look into sales compensation.

Getting Pay Mix Right

By 183:906269490 • January 14, 2025

Best Practices in Sales Compensation Part 4

Job Content is Foundational in Sales Compensation

By 183:906269490 • December 16, 2024

In my first Best Practices post, I talked about the importance of knowing what you can pay for your sales roles before worrying about what the market is saying. In my second post, I covered ways to utilize culture in a sales organization . The following Best Practice in sales compensation involves job content. Job content plays several roles in your compensation plan: 1. It gives your salesperson a guide to what success looks like in their role. 2. It gives you a guide to evaluating the performance of your salesperson. 3. It rationalizes differing levels of variable pay outcomes for varying performance levels. 4. It provides your organization with the structure needed to comply with any reporting, pay transparency, or other regulations. Hopefully, that’s enough to convince you of the importance of taking the time to define your new roles and revisit the definition of your existing roles. Now, here’s how job content actually does those things. Defining the job The first role of job content is to define the who, what, where, when, and how of the function. It can be tempting to borrow a job description from LinkedIn, Glassdoor, etc., with the assumption that the content will be similar enough to fit your needs. However, the way a specific role performs is unique to the organization it’s acting in, which is why it’s important to take the time to define the job from scratch. Here are the questions you should be answering in your job content: What does the person need to do on a daily basis? How does this individual pursue sales, and in what segment or with what type of customer? Where should they focus their time and attention when building a pipeline of deals? Who should they be interfacing with, both internally and externally? When do they engage with customers and/or prospects? What portion of the sales process do they own or support? How do they interface with and influence decision-makers? Now, even though I said to write your job description from scratch, that doesn’t mean this is the time or place to get too creative. Job seekers are going to be searching by job title or category, so it’s essential to stick to the common vernacular regarding industry jargon and expected job titles. Job Description: A Byproduct of Job Content Another positive outcome of creating job content for your roles is that you will have generated much of the information needed for a job description if or when you’re ready to hire. Information such as: Job duties and responsibilities that clarify the type of work and engagement with customers. Qualifications/Requirements that are both minimum and desired. Those include education, knowledge, skills, capabilities, and competencies. Performance measures of the role include items like achieving sales targets, new logo acquisition, development of pipeline, accuracy in forecasting, etc. With all of this information on file, it will not only be easier for you to prepare to hire for the roles you want, but it will also be easier to evaluate existing employees in those roles. Beyond all of that, you’ll be well prepared for competitive market research and establishing your variable pay program. I’ll be posting more best practices on the blog, but if you’re anxious to dive deeper into the subject of sales compensation, you can grab a copy of my book Starting Simple: Sales Compensation and consider working through the companion Workbook to build a sales compensation plan from scratch.

Sales Comp Guy